What really went wrong with HealthCare.gov? Unique insight from Byron King

Dumb stories, funny headlines… the end of the petrodollar?… winding down the “mistress” kerfuffle… and more!

“How can they justify cutting the amount of food stamps when the cost of food is going up?”

Yeah, don’t tell Robin Petersen of Orlando that “inflation is under control.” She works full time and rears four grandchildren.

Hers is among 23,116,928 U.S. households — one out of every five — that collected food stamps in June, the most recent figures available.

And the benefits are set to be cut come Nov. 1 — a week from today. Extra funds for the program that began with the 2009 “stimulus” bill are set to expire. A typical family will see its monthly benefit drop from $272 to $236 — a 13% cut.

Near as we can tell, there’s no wherewithal on either side of the aisle in Congress to scrape up the funds to keep the expanded benefits going.

It’s a safe bet few of those families will know what’s coming when they line up next Thursday night at 24-hour Wal-Marts, waiting for the month’s new benefits to kick in at midnight.

Our mind is drawn to an event two weeks ago…

http://www.youtube.com/watch?v=n7cmmCYJ4eo

The scene was a Wal-Mart in Springhill, La. The computer system that processes EBT payments in 17 states had crashed. Most stores simply refused to accept any EBT cards until the problem was resolved. But in Springhill and nearby Mansfield, management chose to let food-stamp customers continue to shop. Shoppers stripped the shelves bare.

Then the system came back up, and it soon became clear shoppers had splurged way beyond the card limits; one woman had 49 cents left on her card and $700 in merchandise in her cart. The crowd turned ugly. The cops were called in.

We’re not forecasting a rerun seven days from now. It’s just food for thought.

That’s the straight-up federal welfare program that kicks in after the 26 weeks of insurance runs out. And the program is set to expire Dec. 31.

From food stamps to a cat-food retirement? No, not even that.

Every year, Wells Fargo commissions a survey of 1,000 workers between ages 25-75, with household incomes ranging from $25,000-100,000. The results from the most recent poll…

34% expect to work until at least age 80

37% expect they’ll work until they either get too sick or die.

“For the past three years,” says Laurie Nordquist of Wells Fargo Institutional Retirement and Trust, “the struggle to pay bills is a growing concern, and the prospect of saving for retirement looks dim, particularly for those in their prime saving years.”

And no wonder: Americans who have 401(k)s and IRAs are loading up on debt faster than they’re setting aside money for retirement.

Or so concludes HelloWallet, a firm that big employers call on to help their employees with retirement planning. The company recently crunched numbers from the Census Bureau and the Federal Reserve to reach its conclusion.

Among the scary numbers…

They typical household headed by someone age 55-64 now spends 22 cents of every dollar to pay off debt — a proportion no different from younger people, and an increase of 69% over the last 20 years

Most of the people with retirement accounts whose debts are piling up faster than retirement savings are older than 40, are college educated and earn more than $50,000 a year. One-third of them are over 50.

“We raised the victory flag as people increased retirement contributions,” says HelloWallet founder Matt Fellowes, “but in reality the ability of people to retire is a function of lots of different variables, most important of which is what they are doing on the other side of the ledger.”

Well, duh. So much for the “deleveraging” of the American household.

[Ed. Note: We presume you’re better off than the statistical norms we’ve been describing today. But you still might worry you won’t have enough money to live the retirement of your dreams.

Fortunately, a few slots have reopened in our aggressive catch-up strategy that we’ve cheekily dubbed the “30-Day Retirement Plan.” Playing a “subniche of the market that most of Wall Street’s heavy hitters can’t touch, you could hit “your number” faster than you ever thought possible. Follow this link and learn how to get from here to there.]

A quiet day for the major U.S. stock indexes. Most of them are in the green, barely. The S&P’s at 1,755.

Treasury yields are down a bit, the 10-year a hair above 2.5%. Gold is catching its breath after a nice run-up this week — $1,346 at last check. Crude is stabilizing at $97.39.

Unintended consequences: Obamacare edition. CBS News reports “in many of the 15 state-based health insurance exchanges, more people are enrolling in Medicaid, rather than buying private health insurance.”

You can anticipate the problem right away: “If that trend continues, there’s concern there won’t be enough healthy people buying health insurance for the system to work.” Read CBS’ numbers and weep…

Washington: 87% of new enrollees signed up for Medicaid

Kentucky: 82%

New York: 64%.

“Either the private insurance enrollments come up somewhere around the expected amount, or there’s going to be a problem,” says former Medicaid director Gail Wilensky. “You need a volume and you need a mix of people that are healthy, as well as high users in private insurance, in order to have it be sustainable.”

Here comes $1 billion in unanticipated Obamacare costs. Key to the success of the online “exchanges” are a network of new nonprofit insurance companies that are supposed to assure competition.

Cue The Washington Post: “One co-op, however, has closed, another is struggling and at least nine more have been projected to have financial problems, according to internal government reviews and a federal audit.”

If the co-ops fail, defaulted loans could add up to a $1 billion loss to be footed by taxpayers.

“Why did this rocket blow up on the pad?” asks Byron King of the Obamacare website. “Who supplied that firecracker?”

Byron is asking this question rhetorically. He knows a lot about how the government issues contracts — the “procurement” process — based on time as a staffer with the U.S. Chief of Naval Operations. The Navy even sent him through a program on procurement at George Washington University Law School. His insights are ones you won’t learn from watching the tedious hearings this week on C-SPAN.

“Begin,” he says, “with the fact that federal officials selected just one firm to design the Obamacare website, HealthCare.gov. That’s CGI Federal, which is U.S. subsidiary of a Canadian firm called CGI Group.”

Nor does it appear there’s a process of competitive bidding.

During the Bush administration, CGI won a 10-year federal designation called “indefinite delivery/indefinite quantity” or IDIQ. “This designation,” Byron explains, “opened the door for CGI Federal to deliver data processing hardware, software and communication products and services to government customers without public competition.

“Evidently, the Department of Health and Human Services called CGI to design the Obamacare site under the IDIQ contract. So far, there’s no evidence that HHS issued public solicitations. Something like that should have been published in the Federal Register and/or on the HHS contracting website.

“Call it what you want, but this phase of Obamacare was not performed under any semblance of full and open competition. To paraphrase the title of Tom Wolfe’s great book about the U.S. space program, the Obamacare procurement has shown the ‘wrong stuff’ in every respect.”

Ugh… If you get the sense the whole thing was set up to fail, you’re right.

In our ongoing quest to keep the tone light on Friday, we’re driven to desperate measures.

There’s not that much out there we see that’s funny or bizarre today. So we turn to the business page at Fark.com, where ordinary folks try to outdo each other with funny headlines based on real stories.

Here’s one that caught our eye: “Cuba Announces Plans to Unify Their Two-Currency System. Apparently, a Pig Will Now Have Exactly the Same Purchasing Power as a Chicken.”

Indeed, Cuba has both Cuban pesos (CUP), which most people earn for their wages, and the Cuban convertible peso (CUC). The CUC is pegged to the dollar and is currently worth 25 times the value of the CUP in stores. The fear is the CUC will be devalued during unification. Hmmm…

Another Fark headline quotes directly from a Slate review of Alan Greenspan’s new book. “It’s as if Richard Nixon wrote a book about how tougher security at the Watergate Hotel could have avoided a lot of problems for America.” Heh…

But our favorite originates right here in Baltimore: “Hooters Girl Sues Over Being Fired for Unapproved Highlights. Presumably, the Headlights Were Just Fine.”

“A stagnant economy is necessary for the gang of idiots to continue to do what they’re doing,” begins an email that comes out of left field, but is still worth a think.

“If there were more economic activity and the population had more disposable income, it would touch off inflation and the Fed would have to move off its zero interest rate policy. This would drive up the cost of servicing the debt, and the house of cards would collapse. Why aren’t we seeing skyrocketing inflation? Because the banks are holding the money and not doing anything with it except take payments for holding it from the government. It’s only a matter of time.”

“Some thoughts regarding the growing schism between the U.S. and Saudi Arabia,” a reader writes after yesterday’s episode.

“I believe it was 1969 when Kissinger went to the Saudis and created the deal which made the U.S. dollar the global currency for the oil trade, i.e., the petrodollar. In return, the U.S. was able to go off the gold standard.

“If this divide between the two countries keeps growing, could they pull the plug on the petrodollar and allow oil to be traded in any currency? Also, could this be a major step toward ending the dollar as the world’s reserve currency? In the end, we created this partnership with a monster that has the ability to greatly affect this country’s future. Then again, we deserve whatever happens, as it is our own decisions that got us into this mess.”

The 5: The history was a little messier than you describe: First came Nixon cutting the dollar’s last tie to gold in 1971, then the petrodollar trade emerged after the OPEC oil embargo of 1973-74.

But your thesis is shared by some deep thinkers out there. It’s definitely on our radar…

“So Jud Anglin and your reader agree that Obamacare is just a step on the way to single-payer health care,” a reader writes, “and imply that this is to be feared.

“Just how fearful should we be that we might end up paying about half what we spend as a nation now on health care and that our health outcomes, measured any way you choose, will improve toward those of most advanced Western countries? Publish this and try making fun of it.”

The 5: We don’t have to make fun of it after everything we documented today, starting at 2:05.

At the risk of repeating ourselves, we do not defend the cartelized, exorbitant, Rube Goldberg system that was the U.S. health care system before Obama came along. We’re just saying single-payer is the likely endgame, which will have certain consequences many people won’t like, but which can still be avoided or at least mitigated. That’s all…

Have a good weekend,

Dave GonigamThe 5 Min. Forecast

P.S. We think we’ve seen the last of the fallout from the infamous “Obama’s Secret Mistress” presentation. But we’ll take the time to hear from one final reader…

“As I read through the comments and responses in The 5,” he writes, “I wonder if any one really knows what the difference is between socialist, collectivist, capitalist, communist and free enterprise.

“Because of the way these terms are thrown around in general, not just in The 5, I have to believe the definitions aren’t really understood. All socialism is not communism, all free enterprise is not capitalism and all collectivism is not communism.

“The Mistress clip is a classic example of what I am referring to. Collectivism is what is being implied, when in fact Obamacare is little more than a misguided attempt to fix our very broken health care system. I am not qualified to present a solution. I can say for certain that if you look at the statistics, for the money spent, we have a very poor health care system. So presenting clips that throw out inflammatory language only serves to muddy the issue. What is needed right now is clarity on this very important issue.”

You’re right. So Laissez Faire Club director Doug Hill — he who took so many slings and arrows this week for the “mistress” analogy — has gone back to the drawing board.

He comes to the same conclusion, but from a totally different starting point we think you will find refreshingly nonpartisan. Give it a look.

After 15 months and nearly $140,000 of research, we have the blueprint for stocks that turn every $10,000 into $1 million. Plus, the Fed tries to have it both ways: Jim Rickards on Yellen and co.’s dilemma.

Two seemingly unrelated headlines, and the end of health care as we know it. Plus: What if we paid for groceries the way we pay for health care? And: Can you keep your doctor when this trend collapses in less than 20 years?